#186 Creating Jobs and Obligation

Thirty-five years ago, I left a relatively secure job in Texas for a totally insecure start-up company in Nebraska. I had a wife, two kids (one less than a month old), and a new trade; electronics technician. In what seemed like a stroke of luck, I found myself being one of a dozen or so field technicians with some familiarity in the "new" field of electronic scales. Even luckier, I had gone to work for the best of that dozen a few months before he left our employer and started his own business. I'd had the kind of internship that this country gave up on when it decided to crush unions, destroy public education, and fill Washington D.C. with Republican con artists.

After my 2nd daughter was born, my wife and I really wanted to leave Texas, the land of agricultural pollution and, in the 70's, the last strands of a working public education system. My choices were: 1) ask for a transfer to the main company in western Kansas, 2) open my own shop in Guymon, Oklahoma with the support of my old boss who I was working for on the side, or 3) take a job with an independent shop in Nebraska who promised me a share of my department's profits and a piece of the business. Kansas wasn't attractive. Oklahoma was even less livable than Texas, but the attraction of owning my own business and working with my old mentor was strong. One visit to Nebraska and my wife and I decided it was a no-brainer. Nebraska had water, trees, grass, and other natural resources. Oklahoma was . . . Oklahoma. I sold off my music equipment repair business to a local music store, fabricated the equipment I'd need to move my scales business to Nebraska, and we packed up our lives and moved to Nebraska.

The business in Nebraska was floundering. The owner was a terrific salesman, but a terrible manager. He knew 1950's farming technology, but knew nothing about any equipment improvements that had occurred since, especially anything that included electronics. My deal was that I would earn a small salary and commission of 50% of the net earnings of my department. I was 23 and thought a handshake and an employment offer letter would be morally and legally binding. I had a lot to learn. In the past five years, the company had lost an average of $10,000/year in the electronic scales department. They made up for it, sort of, by selling the equipment scales supported for a substantial premium. Competition was minimal and ag was booming. My boss probably thought the 50% net portion of my offer would never cost him a penny.

In the first year, I reorganized the structure of his shop so that the equipment was installed in a more efficient, safer, and quicker manner. I talked his shop foreman into investing in new support equipment, which was an odd thing to have to do because two years earlier three employees were killed when an ancient air compressor blew up and shot shrapnel all over the shop floor. Two ex-employees were still disabled from that incident. With that in mind, we installed the new compressor in an outside addition, putting some plate between the shop floor and the compressor. I convinced the owner into getting two welders state certified for pipe work, to add some insurance to our installations and to crank their skills up a notch. I made personal inspections of every piece of electronic gear we installed and follow-up service was reduced accordingly. By the end of the first year, my department's net (after shouldering the cost of all my main shop improvements) was $100k. I received a check for $2,200 and a piece of paper that implied I had some non-negotiable ownership of the business. Being young and gullible, I assumed I would be made whole the next year. The next year, my department netted $500k including the cost of two part-time employees. I was working 90 hours a week and driving more than 100,000 miles a year to make the business work. My commission that year was deferred because my boss want to spend the money my department made on getting into the irrigation system business.

Less gullible and a little wiser, I talked to a local lawyer who told me that my offer letter did not amount to a legal contract. I should have been much less gullible because, I learned two years later, that my lawyer was a good friend of my boss. Small town, small town rules.

The next year, I cut my hours to around 40, increased my music equipment repair business activity, and spent a lot of my field time stopping in Omaha and Lincoln, submitting resumes anywhere that looked interesting. I found an engineering job near Omaha, quit my job the next week with no notice, and moved my family east 100 miles. Last year, I took a backroads motorcycle trip to western Kansas and passed through that little Nebraska town on the way. The business is still there, exactly as I left it. In the middle of town, however, is a much busier electronic scales installation and repair shop, owned by the son of the man I replaced in 1973. He took the business back from my old employer, almost immediately after I left town. I'd sold him my repair fixtures, because my boss was unfamiliar with any part of my business and the value of the equipment I'd built to test and repair equipment, and I'd given him and his son an extensive tutorial on running the business he had previously given up. They paid my repair rate for the training, my old boss assumed that he was much smarter than me, since he'd managed to rob me so easily, and hired a kid out of tech school to take over the department with no training. Last year, that kid had been working for my old boss's competition for exactly 30 years.

A decade later, I went to work for an audio equipment company in California as a manufacturing, test, and design engineer. This was another company that had never experienced a year of net profit and had been burning through the founder's family fortune for its existence. The company had no bill of materials for its products, no usable mechanical drawings for its chassis parts, and no assembly instructions for the work force. The first three professional hires, myself included, worked long hours to make the products manufacturable and reliable. We created a design process, a product qualification process, we designed the company's first profitable products when the founders were on their first of many long vacations, and we brought manufacturing back to California from Mexico; which increased the company's profits and product quality.

When the company became profitable, one-by-one, the people who provided that profit were dumped as inconvenient. Their reward for hard work and innovation was unemployment and the opportunity to start their careers over when they had past their technological prime. There is a long-standing tradition, in American business (elsewhere, maybe?) of purging the evidence when a company has the good fortune to become successful. Rarely, if ever, does a business succeed on the effort of the founder(s).

Usually, the fearless leader has the good fortune to stumble on to one or more employees who share the vision (usually out of loyal delusion) and apply their talents toward that end. Henry Ford was an interesting low-budget car designer and would have faded into history with the hundreds of other failed US car manufacturers: except Henry lucked into hiring Bill Knudsen who was the real inventor of Ford's mass assembly system; Frank Kulick who was responsible for dragging Ford's Model T obsolete contraption into the next generation of sellable cars; Frederick Taylor the authority on scientific industrial management; Ford's son, Edsel, who Henry rode to death for his efforts in making Ford competitive with GM; and hundreds of more inventive, creative, and harder working men than Henry Ford ever was. In fact, old Henry said of Knudsen, "I let him go not because he wasn't good, but because he was too good -- for me." Apparently, American tradition calls for the founder to gather up his/her imperial resources and purge the company of those who caused the success. Only then can the company's success story be rewritten to make the fearless leader appear fearless and in charge.

A few days ago, I received a shrieking hate letter from someone I thought I knew better, regarding my implication that his conservative approach to changing our failed government was less than honorable. I'd thought that some of my points were pretty funny, if close to true. He is used to being listened to as if he is an all-seeing wizard and objections to his genius are, apparently, uninvited. He is a small corporate business owner in a small town in a market that is destined to join buggy whips in manufacturing and service history; the trucking industry and the associated large diesel engine parts. Desperately wanting to hang on to what has been a pot of gold for a long while, he is, naturally, inclined to try to entice everyone to vote for the status quo, no matter what that does to the country's future. He ended his letter with the comment, "It takes people like me to create good jobs for people a lot better than you."

I'd add, it takes employees -- like the one I was when I was young and gullible -- to make up for the talents employers like you lack. I've made better employers than you richer than you. My risks were as great, including going broke when an employer decided to eliminate 80% of its employees rather than share the risk in an economic downturn. My rewards were never comparable to yours. One of the reasons American corporations are cranking up the immigration quotas is that they have pissed off the American work force and can no longer con them into shooting themselves in the foot in order to make selfish, corrupt rich folks even richer.

The lack of responsibility and risk that modern incorporation provides to business owners and stockholders has done, probably, irreparable damage to the social contract between the employed and employers. The level of entitlement and corruption in the ruling class is unequaled in history, exceeding the royals of Great Britain and the slave owners of Rome. This kind of class split happened to the US in the 1880's and, again, in the 1920's and the result was catastrophic for the nation, but the split was never as deep as it is today.

Today's corporate executives are less useful, more wealthy and powerful, and more destructive to the country than any ruling class since the British royals of the turn of the last century. Worse, the US's ruling class has the ability to launch a world-destroying nuclear war in a knee-jerk response to losing power and wealth, this is the most dangerous time in the history of humanity.

Our republic has swung toward fascism and democracy and social equality has never seemed so impossibly remote. The arrangement between employers and their employees is part of that problem. Maybe, the most important part.

August 2008